Probate, Section 1717: Section 1717 Prevailing Party Attorney Fees Of $84,402 Awarded To Plaintiff Pursuant To Trust’s No-Contest Clause Reversed On Appeal

No Basis For Fees Under No-Contest Clause Because Trust And Its Terms Were Not Contested, And Plaintiff Forfeited Argument For Fees Under Prob. Code § 17211(b) By Not Raising It Below.

            In Haley v. Konatich, Case No. A160725 (1^st Dist., Div. 2 June 29, 2021) (unpublished), three siblings were the beneficiaries of their late mother’s Trust. After the sister died, her husband – as executor of sister’s estate – sued the two brothers, and a related LLC controlled by the brothers, for his late wife’s share of the distributable trust estate. After prevailing against the brother who was the trustee of the mother’s estate, husband successfully moved to recover § 1717 attorney fees under a no-contest clause of the Trust – with the trial court awarding husband $84,402 against trustee brother, both individually and in his capacity as trustee, and against the related LLC.

            The 1/2 DCA reversed. As relevant in this case, a no-contest clause “shall only be enforced against . . . [a] direct contest that is brought without probable cause.” (Prob. Code § 21311(a)(1).) Pursuant to § 21310(b), a direct contest is narrowly defined as “a contest that alleges the invalidity of a protected instrument or one or more of its terms, based on one or more of the following grounds”: forgery; lack of due execution; lack of capacity; menace, duress, fraud, or undue influence; and/or revocation of a will pursuant to § 6120, revocation of a trust pursuant to § 15401, or revocation of an instrument other than a will or trust pursuant to the procedure for revocation that is provided by statute or by the instrument. As husband acknowledged, his lawsuit was not a contest of the Trust’s terms, but an effort to enforce the Trust. Trustee brother also did not contest the Trust or its terms. Rather, this dispute was ultimately over the interpretation of the Trust as a whole – with trustee brother being found by the trial court to be in breach of his fiduciary duty as to his sister.  Because there was no contest of or attack on the Trust or its terms, there was no basis to award legal fees under the Trust’s no-contest clause.

            Additionally, the panel declined consideration of husband’s argument that he was entitled to fees under Prob. Code § 17211(b) – which allows a trial court to award fees where a beneficiary contests the trustee’s account and the trustee opposes the contest without reasonable cause and in bad faith – because husband forfeited the argument by not raising it below.